European Central Bank Head Lagarde to Resign Early in 2027
Christine Lagarde will leave the European Central Bank on February 7, nine months before her term ends, giving EU leaders time to choose a successor before…
FRANKFURT — The European Central Bank head, Christine Lagarde, said on Thursday she will step down on February 7, nine months before her eight-year term was due to end on October 31, 2027. The announcement opens the way for European leaders to choose her successor before France's presidential election next year.
The timing matters for borrowing costs across the 21 countries that use the euro. The ECB's governing council sets interest rates for the bloc, which affect everything from house purchases to new factories. The bank also serves as the European Union's chief crisis fighter in times of economic and financial turbulence.
Lagarde, 70, made the announcement just before the ECB left interest rates unchanged. The bank maintained expectations for another hike in December, warning that high and rising energy costs were fuelling inflation risks.
Why she is leaving
At a press conference after the policy decision, Lagarde said the neutrality her job demands stops her from speaking out on issues beyond monetary policy. She had earlier said she could not leave with inflationary clouds on the horizon, and was asked about the change.
"I don't think that I can remain neutral," she said. She added that she sees the truth "very often damaged, contradicted by misrepresentation." She did not say which matters she wanted to address, and she did not answer questions on whether she left early to let a successor be picked before the French vote.
She told her ECB colleagues after their two-day policy meeting ended. According to a source who was present, she became choked with emotion several times while reading her resignation message. In a video message on X, she said she leaves "with a sense of good work done and an ECB that is fit for the future."
The French election factor
Speculation had swirled for months that Lagarde would leave early. Departing now lets current EU leaders, including pro-EU French President Emmanuel Macron, pick the next ECB chief. Polls show far-right candidate Marine Le Pen is favored to win the election in April-May 2027.
Le Pen has said she wants to discuss the ECB's role and, if elected, would seek central bank intervention to ease France's interest rate burden. Jean-Philippe Tanguy, who is drafting economic policy for her manifesto, called the move "another insult in our direction – lamentable."
Markus Ferber, a German member of the European Parliament for the centre-right European People's Party, said the exit sends "the wrong signal" given high inflation and nervous bond markets. He sits on the parliamentary committee that will confirm the successor. Macron thanked Lagarde and called for the transition to be prepared in an orderly and balanced manner.
Three vacancies, one bargain
Lagarde's seat is one of three top ECB jobs to fill. Executive board member Isabel Schnabel leaves January 3 to join the International Monetary Fund, and chief economist Philip Lane's term ends May 31. European leaders are expected to negotiate a package deal that spreads the posts among member countries.
European Council President Antonio Costa said the selection process would start immediately and "proceed without delay." Holger Schmieding, chief economist at Berenberg bank, said leaders would likely seek agreement on all three posts before a summit on December 17-18.
Former Netherlands central bank head Klaas Knot and Pablo Hernandez de Cos, the former Spanish central bank governor who now runs the Bank for International Settlements, are seen as frontrunners.
Markets shrug
Investors showed little reaction. Schmieding said her early exit "is no surprise and does not change the outlook for ECB policies." Danske Bank economist Piet Haines Christiansen said both rumored successors are competent, well-established central bankers, so for markets "it won't matter too much."
Lagarde, a former IMF head, took the ECB job in 2011's succession from Mario Draghi, according to the account of her appointment. In 2020 the bank deployed 1.35 trillion euros ($1.5 trillion) in bond purchases to keep the COVID-19 pandemic from drying up credit.
